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Federal Retirees


For those approaching retirement as well as the currently already retired, here is a forum to share ideas and thoughts and exchange questions and answers.


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FedCivServ  
#1 Posted : Wednesday, December 19, 2018 10:52:44 AM(UTC)

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I am retiring in one month...who hoo! I am still 6 years away from this decision but for planning purposes -- take retirement at 62, 67 or 70? I had always heard that you should take it as late as possible if your health is good (check for me and hubby) but our financial advisor just told us to take it at 62. I was kind of surprised! We don't need it (i don't think; still not sure how things will go since i'm still working) but i think we will have enough with pensions, TSP, and other investments to not need the SS money for daily life. Would love to hear what others think.. thanks!
NeutronBoy  
#2 Posted : Wednesday, December 19, 2018 12:50:05 PM(UTC)
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Congrats - you will love it. I retired at the end of May 2018) - I am 62 and took SS right away. I needed it to let me retire comfortably at 62 - my take home now is about 1% higher than my take home when I was working. We never felt like we struggled for $$ when I worked, so retirement should be the same, and so far it has been. I am pulling 4% from TSP, so that should last for a long time. 4% is the magic number to make the fund last a long time. I calculated my break even point for SS and it happens at about age 76. I want the money now so I can travel while I am still healthy - I think I may do less when I am 15 yrs older.

If you can can live OK with taking it now - I would suggest doing so. We never know how many yrs we have left in this life and it should be enjoyed while we are still healthy enough to do so.

Another bonus was the quick turnaround by OPM - I was able to bank all of my excess leave pay (about 300 hrs) and I have a nice fat cushion in my bank account. Hope that works the same for you, although January retirements can take a bit longer because a lot of people do it then. They do give interim payments, so it is not too bad even if it takes a while.

Mark
FedCivServ  
#3 Posted : Friday, December 21, 2018 6:17:32 AM(UTC)

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Thanks! i appreciate the insight. i'm in the Acq Demo pay system and we get our performance bonus payouts the pay period starting 7 Jan so hopefully that will give me a nice $ amount too. I am selling back 248 hours of annual leave too. i'm only 56 so don't need to make a decision on SS right away but i am a planner and like to know the in's and out's before making a decision! i actually will get the FERS supplement which takes me from MRA to 62 and is about 75% (i think) of my SS wages. So it would really be just keeping things steady if i take SS at 62 since the FERS supplement stops then regardless of when you actually apply for SS. Appreciate the response and agree wholeheartedly on travel... we have a safari planned for right after i go out and a month in the sunbelt after that... :)
Raoul  
#4 Posted : Friday, December 21, 2018 11:04:23 AM(UTC)

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That's the crazy thing about when to take Social Security, if you don't need it, take it.
If you do need it, don't take it.
Retired July 2011
thanks 1 user thanked for this useful post.
someoldguy on 12/26/2018(UTC)
Roger.D  
#5 Posted : Friday, December 21, 2018 12:01:24 PM(UTC)
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I put together a spreed sheet to see how the numbers played out.

62 vs. 65, breaks even at 76 and 11 months.

62 vs. 70, breaks even at 79 and 1 month.

65 vs. 70, breaks even at 82.

With that, I tried to calculate the "what if" you stared to draw SS at age 62 and put the money away at say 4%. Then stared to take it at 65 or 70 to "make up" the difference. The funds didn't last as long. But I couldn't see it as a bad option.

A family fried was in this situation about 20 years ago. Their advisor also said to take it at 62.

Socialist governments traditionally do make a financial mess. They always run out of other people’s money. --Margaret Thatcher
FedCivServ  
#6 Posted : Wednesday, December 26, 2018 6:17:10 AM(UTC)

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Thanks Roger.. that's very helpful! Although i have "longevity" genes you really just never know. i like the 62 and invest if the $ isn't needed. I think that might have been in our FA's mind too... give me that money so i can invest it! :) happy new year to all...
someoldguy  
#7 Posted : Wednesday, December 26, 2018 6:49:46 AM(UTC)
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A lot of people I know who consider themselves financially savvy say to take it as soon as possible.

I think I like the idea of higher cash flow, so I will wait. Besides, I got a late start on my federal career so I won't be able to retire at 62 (at least if I want to qualify for my FERS pension). But I don't think I will wait til age 70!

Edited by user Wednesday, December 26, 2018 6:52:32 AM(UTC)  | Reason: And another thing...

DISCLAIMER: You read it on an open internet forum :)
Endless Summer  
#8 Posted : Wednesday, December 26, 2018 6:55:01 AM(UTC)
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Originally Posted by: FedCivServ Go to Quoted Post
Thanks Roger.. that's very helpful! Although i have "longevity" genes you really just never know. i like the 62 and invest if the $ isn't needed. I think that might have been in our FA's mind too... give me that money so i can invest it! :) happy new year to all...


One observation about taking the money at 62 and investing it. each year that you delay taking your SS payments increases the monthly benefit by 8% until age 70. For instance, if you start collecting benefits at 63 your benefits will be 8% higher than if you began at 62. If you are confident that you can consistently beat 8% on your investments then it makes sense to file early. In reality, you need to do much better than 8% because you are only investing the monthly benefit amount.

Another thing to consider is taxes. Your benefits will most likely be at least partially taxed. SSA.GOV has some very good planning tools where you can try out various scenarios. Excel is an excellent tool for "what if?" analysis.

If you really don't need the money, I'd wait. At least, that is the scenario that makes sense for me.

someoldguy  
#9 Posted : Wednesday, December 26, 2018 4:32:21 PM(UTC)
someoldguy

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Here's another take on the when-to-take question:

Quote:
Many people who wind up with a smaller Social Security check because they claim their benefit early could have waited longer to file, thanks to funds in their IRA.

That's the finding from a recently published study in the Journal of Pension Economics & Finance.

"It seems like there is a significant portion of the population claiming early even though they have the potential to finance a delay," said Gopi Shah Goda, a co-author of the study and the deputy director and senior fellow at the Stanford Institute for Economic Policy Research.

Around 34 percent of beneficiaries who claim their Social Security before 66 — the current full retirement age for most people — have enough money in an IRA to finance the equivalent of at least two years of Social Security benefits, the researchers found. A quarter of them had enough to finance at least four years.
For a larger Social Security check, tap your IRA first

And by making withdrawals from your IRA, you can reduce the amount of mandatory withdrawals later, which could help reduce the tax bite.
DISCLAIMER: You read it on an open internet forum :)
invictus  
#10 Posted : Thursday, December 27, 2018 9:14:23 AM(UTC)
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It sounds like you need to get rid of your "advisor".

Agree with others. Everything I've read recommends delaying social security as late as you can unless you expect to have a shortened lifespan.
"One other income source to consider: Social Security. Unless both you and your spouse have a low life expectancy, the best version of an inflation-adjusted annuity out there is bought by spending down your nest egg before age 70 so you can defer Social Security until then. That way, you, or your spouse, will receive the maximum benefit."
http://time.com/money/28...en-to-get-out-of-stocks/

I hope your advisor isn't selling you high priced, high commission products like variable annuities or high cost mutual funds.
thanks 1 user thanked invictus for this useful post.
Endless Summer on 12/27/2018(UTC)
Endless Summer  
#11 Posted : Thursday, December 27, 2018 1:55:13 PM(UTC)
Endless Summer

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Originally Posted by: invictus Go to Quoted Post
It sounds like you need to get rid of your "advisor".

...

I hope your advisor isn't selling you high priced, high commission products like variable annuities or high cost mutual funds.


This bares repeating. It sounds like you don't need the SS money, let it sit and draw a guaranteed 8% annual return. If you draw now and invest it, by the time the IRS, the FA, and the market are done with you you'll be lucky to break even.
Noontime  
#12 Posted : Sunday, December 30, 2018 4:10:11 PM(UTC)
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There is no right or wrong way to do it. The key is the break even points and then living long enough past the break even points to gain the profit by deferring. Remember, the idea of "letting your money earn 8%" doesn't apply until the break even point is reached. So if you take it at 62 vs. 70, the break even point is 79 and 1 month (the amount received up to that point is the same). So starting at 79 and 2 months is the point you'll mathematically feel the pain of not deferring or the happiness of profit by deferring.

My rationale falls under this camp - by not taking at 62, I'm losing the enjoyment of the money while still doing things in life other than health related issues. I'm also taking a risk that if I drop dead I get nothing. With the break even points being so far in the future, the only way to mathematically profit by deferring is to not only live to the break even point, where it's equal, but then live long enough to gain a nice profit by the deferral. If I knew I'd live until 90 and the break even point is 79 then yeah, I'd consider waiting to get those 11 years of profit.
kaljor  
#13 Posted : Monday, December 31, 2018 10:35:22 PM(UTC)

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I understand the thinking behind reaching the break even point, but I've never accepted this as the most important factor in the decision as to when to begin SS payments. Since none of knows when we will die, we can never make a "correct" decision on this basis, we can only make a decision that works out eventually to be correct or incorrect. So to me, not an issue. What is an issue to me is that generally speaking, I believe most of us will be curtailing our optional recreational activities around age 80 or so. So my focus is maximizing my income during the years when I expect to remain socially active, and I believe that is age 62 through age 80. So I aim to wait until FRA, which in my case is 66. I think that's a pretty good balance, and that's what I advise all my relatives, and friends who ask me.

In a very simplistic way of expressing it, we have a choice of small, medium, or large and I firmly believe in medium.

Of course this is just one man's opinion, and any individual's personal circumstances can suggest a different decision.
teeeeej  
#14 Posted : Tuesday, January 1, 2019 5:52:55 PM(UTC)
teeeeej

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I suggest reading the Bogleheads thread on this topic:

https://www.bogleheads.o...m/viewtopic.php?t=102609
FedCivServ  
#15 Posted : Wednesday, January 2, 2019 5:54:38 AM(UTC)

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Invictus, our financial advisor is world class and has made us very wealthy (which I would never have mentioned on fed soup except for your comment that we should get rid of him). I was joking about my comment that he wants the money to invest and NO he has not pushed us into doing anything...no annuities whole life policies or anything else. You can see all the different opinions on here on the best age to take and I was just curious to see what everyone else was doing. Our lives won’t change no matter what we do with social security and we have no children that expect a large inheritance. That gives us more options than most I suppose.
NeutronBoy  
#16 Posted : Thursday, January 3, 2019 8:00:29 PM(UTC)
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One other factor that helped me decide to take SS early was that I did not want to draw down my TSP to replace SS income. My account would drop to about 60% of it's current state if I did that. Only drawing down 4% theoretically will make it last 40+ years and not see any appreciable change (other than the IRS mandated RMDs). That was important to me. I wanted to leave something for the kids, but as time marches on, I am thinking we will spend it on ourselves!!

Edited by user Thursday, January 3, 2019 8:01:25 PM(UTC)  | Reason: Not specified

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